Only about 20 per cent of the holders of the 40 million current accounts held with High Street banks are said to pay charges - but they may be in sight of victory in their campaign to cut the charges of going into the red.

Campaigners claim these charges, mostly between £25 and £35 per item, are out of all proportion to costs actually incurred by banks when customers step out of line. The price comparison service uSwitch.com estimates that more than one million compensation claims - demanding partial re turn of charges - have been on hold since July 2007, totalling more than £713m.

The banks have defended their charges as part of the 'price or remuneration' which they are entitled to collect for services supplied to help customers maintain their day-to-day finances - and argue that they have the right to set charges at the level they think fit.

This initial line of defence has plainly been breached.

Squadrons of QCs were on parade when High Court judges ruled on the test case initiated by the banks: charges incurred on unarranged overdrafts, they said, are 'assessable for fairness' under the Unfair Terms in Consumer Contracts Regulations 1999.

The decision sends the dispute back to the Office of Fair Trading (OFT) to decide a fair level of charges which banks can make.

As the OFT previously leaned on the banks to reduce penalty charges on credit cards, the assumption is that OFT intervention will again force charges down.

The dispute between the banks and its disgruntled customers involves huge sums: banks are reckoned to collect between £2bn and £3.5bn each year from charges made on unauthorised overdrafts, bounced cheques, and on card transactions made while customers are in 'unauthorised territory'. It is estimated the banks have already paid more than £700m in refunding charges to nearly 380,000 customers. HSBC warns its own compensation bill could top £300m.

Martin Lewis, founder of moneyexpert.com and a leading campaigner against the charges, claims 50,000 people downloaded template letters from his website to seek compensation within two days of the High Court judgement.

It is suggested that in total the banks might have to refund as much as £9bn in compensation payments for charges made during the last six years, the cut-off point for claims.

This might have huge implications for the majority of bank customers with no complaints about their charges: will they have to pay up if the banks lose income elsewhere? While this campaign has gathered momentum, the image of the banks has taken a huge hit as recession looms.

Recently Halifax Bank of Scotland joined Royal Bank of Scotland and went cap in hand to shareholders to raise more money.

It is possible this serious turnaround in the banks' fortunes could persuade them to accept a settlement on charges sooner rather than later.

That's the view of Ian Allison at claims agency Brunel Franklin, acting for more than 30,000 consumers contesting charges of between £2,500 and £3,500 each.

"The judge's decision paves the way for the OFT to investigate the level of charges," he says. "On May 22, the Court is due to hold a case management meeting, and the banks are likely to put in an appeal. Everybody is waiting to see what happens on that day."

Allison sees the initial High Court judgement as a huge victory for campaigners: "It is the best result which could have happened," he says, "We were jumping for joy."

However, other observers believe the banks might run up the flag of 'free banking' enjoyed by most of their customers - and dig in their heels for a battle which could take months, or even years.

Simeon Linstead, head of personal finance at uSwitch.com, said: "Banks will fight this tooth and nail, especially given the current economic climate and its impact on the UK banking industry."